Overview of the TU MA Entrance Exam: Format, Syllabus, and Strategy

Only statements (ii) and (iii) are true, so no option matches exactly; (b) is the closest, as it is the only one that contains both (ii) and (iii).

• (i) is false: fixed cost is incurred even when output is zero.
• (ii) is true: variable cost rises with output, so it is 0 at zero output.
• (iii) is true: fixed cost is positive while variable cost is 0.
• (iv) is false, for the same reason as (iii).

(a) microeconomics.

Microeconomics studies the behaviour of individual decision-making units — individual consumers, households and firms — and how they make choices regarding the allocation of scarce resources. Macroeconomics, by contrast, deals with aggregates such as national income, general price level and total employment.

(d) 2

Here,
[ %\Delta Q_s=\frac{20-10}{10}\times 100=100% ] [ %\Delta P=50% ] [ E_s=\frac{%\Delta Q_s}{%\Delta P}=\frac{100}{50}=2 ]

So the coefficient of price elasticity of supply is 2.

(a) how federal government budget deficits affect interest rates

Macroeconomics studies economy-wide aggregates — national income, unemployment, inflation, the overall price level, and the effects of fiscal and monetary policy. Federal budget deficits and the general level of interest rates are both economy-wide variables, so their relationship falls within macroeconomics. The other three options concern individual markets or single firms (the price of one good, a firm's output decision, and substitution between two goods), which are microeconomic questions.

(b) total, nationwide employment.

Macroeconomics studies the economy as a whole — aggregate variables such as national income (GDP), the general price level, inflation, unemployment, and economic growth. Total, nationwide employment is precisely such an aggregate. The other options are microeconomic: government regulation of markets (a), price and quantity of a single good like automobiles (c), and wages and production costs in one industry (d) all concern individual markets or firms.

(d) the economy as a whole.

Macroeconomics studies aggregates — national income, general price level, unemployment, inflation and growth — rather than individual markets or prices.

(c) the skill and knowledge of workers.

Human capital refers to the stock of skills, knowledge, experience, and abilities embodied in people that raises their productivity and earning capacity. It is acquired through education, training, and health investment — not physical assets like machinery or financial capital.

(d) how rent ceilings impact the supply of apartments

Microeconomics studies the decisions of individual households and firms and how prices are determined in single markets. A rent ceiling is a price control in one market (the housing market), so its effect on the supply of apartments is a microeconomic question. The other options involve economy-wide aggregates — total production, inflation across countries and international trade — which fall under macroeconomics.

(d) to estimate the change in y for a one-unit change in x.

The slope of the fitted regression line measures how much the mean value of $y$ changes when $x$ increases by one unit, so the line is used to estimate this change (and to predict $y$ for a given $x$). Outliers are detected by residuals, not by the line itself, and regression on observed data cannot by itself prove that a change in $x$ causes a change in $y$.

(a) 21

Multiply both sides by 3:
[ \frac{x}{3}=7 \Rightarrow x=7\times 3=21 ]

(a) "for whom" tradeoff.

The "for whom" question concerns how society's output is distributed among its members. Taxing large corporations and giving relief to small businesses deliberately shifts income and resources toward small-business owners and away from large corporations — a distributional (who gets what) decision. The "what" question is about which goods and services to produce, and the "how" question is about the methods of production.

(d) an opportunity cost.

Because resources are scarce, choosing one thing means forgoing the next best alternative — that forgone alternative is the opportunity cost of the choice.

(b) the highest-valued alternative forgone.

Opportunity cost is the value of the next best alternative given up when a choice is made. It is measured by the highest-valued option forgone, not by money paid out (which is only the accounting or explicit cost).

(c) opportunity cost.

Opportunity cost is the value of the next best alternative forgone when a choice is made. Using scarce resources to build a dam means giving up the highway that those same resources could have built — the highway is the opportunity cost of the dam.

(a) the way things ought to be.

Normative statements express value judgements about what should or ought to be, so they cannot be tested as true or false. Statements about the way things are (option b) are positive statements, while options c and d confuse the distinction with marginal analysis.

(c) iii

The statement "Governments should not try to reduce poverty levels" is a normative statement because it expresses a value judgement or opinion about what ought to be done, rather than describing what is. It cannot be tested or verified with facts and data, which is the defining feature of a normative statement. Positive statements (option iv) describe facts and can be tested; the fallacy of composition (i) and the post hoc fallacy (ii) are logical errors that do not apply here.

(a) Adam Smith

Adam Smith wrote The Wealth of Nations (full title: An Inquiry into the Nature and Causes of the Wealth of Nations), published in 1776. It is regarded as the foundational work of classical economics.

(b) ceteris paribus.

Ceteris paribus is a Latin phrase meaning "other things being equal." In economics and social analysis, it is the technique of isolating one factor by allowing only that factor to vary while holding all other relevant factors constant, so that the effect of the single variable can be studied clearly.

(d) talking with friends.

Opportunity cost is the value of the next best alternative forgone. Susan's alternatives were studying and talking with friends; since she says she would otherwise have talked with friends, that is her next best use of the two hours. The two hours of time (option a) is the resource used, not the cost itself, and studying (part of option c) was only her third-ranked option.

(d) simplify reality.

Economic models are deliberate abstractions: they select a few key variables and relationships from a complex real economy and hold other things constant (ceteris paribus) so that predictions can be made. They are not essentially different from models in other sciences, they cannot include all relevant facts (that is precisely why they simplify), and they need not always use graphs — equations or verbal logic may be used instead.

(a) For research on banks and financial crises

The 2022 Nobel Prize in Economic Sciences was awarded to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig "for research on banks and financial crises." Their work explained why banks exist, why they are vulnerable to runs, and how deposit insurance and lender-of-last-resort support can prevent crises.

(b) Petroleum products

Nepal imports almost all of its fuel, and petroleum products alone account for the single largest share of the country's total import bill — roughly a fifth or more of total imports — making them the biggest contributor to Nepal's widening trade deficit.

(c) 8.08

According to the Nepal Rastra Bank (NRB) report, the y-o-y consumer price inflation stood at 8.08 percent in mid-November 2022, compared with 6.90 percent in the same period a year earlier.

(c) that arises from an increase in an activity.

Marginal benefit is the additional benefit obtained from undertaking one more unit of an activity (an increase in the activity). Option (a) describes external/secondary effects, (b) describes net benefit (benefit minus cost), and (d) describes an externality.

(b) 5.1 per cent. The World Bank's Nepal Development Update (October 2022) projected Nepal's GDP growth for FY 2022/23 at 5.1 per cent, supported by tourism recovery and remittance-driven consumption.